BUNZL PLC BUSINESS CASE
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March 2013
Bunzl Business Case March 2013
About Us
Bunzl is a growing and successful Group providing outsourcing solutions and value added distribution across the Americas, Europe and Australasia
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Bunzl Business Case March 2013
Business Overview
Sales channel
Business to business distribution £5.4bn revenue in 2012
Products
Wide range of non-food consumable products
Sourcing
From leading brand manufacturers Own brands and unbranded products Sourcing centre in Shanghai – no own manufacturing
Footprint
More than 12,800 employees International diversification: 27 countries, 4 continents
Key Facts
UK plc headquartered in London Listed on LSE; FTSE 100; Support Services sector
Financials
Revenue growth (CAGR 04-12): 11% Operating profit growth* (CAGR 04-12): 9% Average annual cash conversion† (04-12) of 97%
*Before intangible amortisation and acquisition related and corporate costs †Operating cash flow before acquisition related costs to operating profit before intangible amortisation and acquisition related costs 04-05 continuing operations only
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Bunzl Business Case March 2013
Benefits to Customers: Supply Chain
Global sourcing & procurement
International warehousing & distribution infrastructure
Consolidation of consumables
Range of delivery options
Customer
Supported by an integrated I.T. platform
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Bunzl Business Case March 2013
Value Proposition
• In-house procurement and PRODUCT COST INVENTORY INVESTMENT
self distribution is costly
COST TO ACQUIRE
• Bunzl applies its resources and expertise to reduce or eliminate many of the “hidden” costs of in-house procurement and self distribution
INVENTORY INVESTMENT CASH FLOW
DIRECT LABOUR & OVERTIME INVENTORY FINANCE COST EXPEDITED ORDERS
COST TO PROCESS
INBOUND FREIGHT PURCHASE ORDER ADMINISTRATION INVENTORY DAMAGE & SHRINKAGE
• The benefits to customers are
ACCOUNTS PAYABLE ADMIN
a lower cost of doing business and reduced working capital
STORAGE SPACE CAPITAL EMPLOYED
Outsourcing adds value to the customer -4-
Bunzl Business Case March 2013
Market Environment
Growing market sectors
Fragmented competitors
• Exposed to growing sectors including • Foodservice – away from home • Cleaning & Hygiene – away from home • Healthcare – demographics • Safety – increased legislation
• None do what we do, on our scale and across our markets • Bunzl’s national footprint provides competitive advantage
Customer base
Outsourcing trend • Customers and manufacturers focusing on their core business
• Strong customer base • Working with national and international leaders • Aligned with customer growth
Multiple growth drivers -5-
Bunzl Business Case March 2013
Strategy
Operating Model Efficiencies GDP+ Organic Growth
Acquisition Growth
ROIC 17.9% Consistent and proven strategy -6-
Bunzl Business Case March 2013
Strategy Building Blocks
Unique business model
Attractive markets portfolio
Balanced business portfolio
Operational focus
Global procurement
Acquisition strategy & track record
Experienced management
Strong financial discipline & track record
A platform for growth -7-
Bunzl Business Case March 2013
Business Model
Suppliers
Bunzl
Customers Grocery
Individual ranges
Consolidated offer
TO
TO
Foodservice Cleaning & Hygiene Safety Non-food Retail
• Global suppliers • Low cost sources • Commodities • Own brands
• International warehousing & distribution infrastructure • Consolidation • Supply chain management • Range of delivery options
Healthcare
One stop shop for non-food consumables -8-
Bunzl Business Case March 2013
Attractive Customer Markets Portfolio Healthcare 7% Disposable healthcare consumables range, including gloves, swabs, gowns and bandages, to the healthcare sector
Other 4% A variety of product ranges supplied to other markets such as government and education establishments
Non-Food Retail 8% Goods not for resale, including packaging and full range of cleaning and hygiene products, to department stores, boutiques, office supply companies, retail chains and home improvement chains
Grocery 29% Goods not for resale (items grocers use but do not actually sell), including food packaging, films, labels and cleaning and hygiene supplies, to grocery stores, supermarkets and retail chains
Safety 9% A complete range of personal protection equipment, including hard hats, gloves, boots and workwear, to industrial and construction markets.
Foodservice 29% Non-food consumables, including food packaging, disposable tableware, guest amenities, catering equipment, cleaning products and safety items, to hotels, restaurants, contract caterers, leisure sectors and food processors
Cleaning & Hygiene 14% Cleaning and hygiene materials, including chemicals and hygiene paper, to cleaning and facilities management companies, and industrial and healthcare customers.
c.80% resilient – Grocery, Foodservice, C&H, Healthcare -9-
Bunzl Business Case March 2013
Typical Products Foodservice
Grocery
Safety
Cleaning & Hygiene
Non-food Retail
Healthcare
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Bunzl Business Case March 2013
Balanced Business Portfolio
Geographic balance North America
7% Continental Europe
19% 54% 20%
UK & Ireland Rest of the World
Regional diversification • Our markets are at different stages of maturity • National footprints • International brands and local products
Customer markets balance • 6 market sectors with numerous sub-sectors • Products and markets - specialist distributors • Direct to customer or through a sub-distributor
Diversified by geography and sector -11-
Bunzl Business Case March 2013
Operational Focus
Decentralised operational structure • Hands on management with clear customer focus • Full P&L and working capital responsibility • Aligned incentive measurement with profit and ROCE
Investing • Majority of capex spend on IT systems and warehouse facilities • Robust IT and systems strategy e.g. Warehouse management, order systems and vehicle routing • Continually evaluating and upgrading our warehousing facilities
Sharing best practice -12-
Bunzl Business Case March 2013
Global Procurement
Sourcing
Preferred suppliers
+
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Own brands Commodities Low cost sources Eco-friendly products
Bunzl Business Case March 2013
Acquisition Strategy Key attributes • Financial returns • In resilient and growth markets • Business to business • Consolidated “not-for-resale” product offering
Acquisition types • Bolt-on – existing geography and market • Extending product range • Consolidating markets
Extracting value • Purchasing synergies • Warehouse & distribution efficiencies • Back office integration
• Anchor – new geography or market
• Similar model – no manufacturing
• Entering new geographies
• Fragmented customer base
• Entering new markets
• Strong local management
• Customer overlays • Product range extensions • Sharing best practice • Investment in infrastructure
• Scope for further consolidation
Acquired businesses continue to feel ‘local’ -14-
Bunzl Business Case March 2013
Acquisition Track Record
2004
2005
2006
2007
2008
2009
2010
2011
2012
7
7
9
8
7
2
9
10
13
Committed acquisition spend (£m)
302
129
162
197
123
6
126
185
272
Annualised acquisition revenue (£m)
430
270
386
225
151
27
154
204
518
Number of acquisitions
2004-2005 continuing operations only
Average acquisition spend £167m p.a.
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Bunzl Business Case March 2013
Geographic expansion 27 countries
23 countries
18 countries
12 countries
7 countries
1997*
2003*
2005*
2008
2012
Continuing geographic expansion * Continuing operations
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Bunzl Business Case March 2013
Experienced Management
Michael Roney Chief Executive
Brian May Finance Director
Patrick Larmon Executive Director
Experienced executive directors and management team -17-
Bunzl Business Case March 2013
Strong Financial Discipline
High return on capital
Return on operating capital 56.4% Return on invested capital (pre-tax) 17.9%
Strong balance sheet
Net debt/EBITDA 1.8x year end 2012
Low working capital requirements
Average working capital to sales at 9.6% in 2012
Low capex
Average of £23m p.a. over past 3 years
High free cash flow yield
Operating cash flow† to operating profit* average of 97% over past 9 years
Uniform financial reporting system
Across all geographies
Growing dividend stream
Dividend per share CAGR of 10% over past 8 years
Strong financial model †Before
acquisition related costs *Before intangible amortisation and acquisition related costs
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Bunzl Business Case March 2013
Strong Financial Discipline Average Cash Conversion* 97% 110% 103% 93%
2004**
102%
95%
92%
2005**
2006
93%
92%
2007
2008
2009
2010
93%
2011
2012
Consistently strong cash conversion *Operating cash flow before acquisition related costs to operating profit before intangible amortisation and acquisition related costs **04-05 continuing operations only
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Bunzl Business Case March 2013
Financial Track Record Revenue (£bn)
Operating profit (£m) 5.4
04-05 continuing operations only
Before amortisation and acquisition related and corporate costs 04-05 continuing operations only 297
5.1 4.6
4.8
353 312
371
323
4.2 259
3.6
241
3.3
218
2.9 183
2.4
2004 2005 2006 2007 2008 2009 2010 2011 2012
2004 2005 2006 2007 2008 2009 2010 2011 2012
Adjusted eps (p)
Dividend per share (p) 28.2
68.5
As reported
41.7
23.4
As reported
60.6 52.7
38.7
26.4
71.8
20.6
55.9
21.6
18.7 17.0
45.1
15.7 13.3
32.1
2004 2005 2006 2007 2008 2009 2010 2011 2012
2004 2005 2006 2007 2008 2009 2010 2011 2012
CAGRs 9% to 11% -20-
Bunzl Business Case March 2013
Business Case Summary Clear strategy for growth
• Entering new markets/product groups • Expansion/penetration of established markets • Strong operational focus
Strong business model
• Clear value added for customers and suppliers • Recurring revenues • “Big in the middle”
Attractive markets
• Resilient and growing markets • Multiple growth drivers • Fragmented with opportunity to consolidate
Balanced portfolio
• Product diversification • Geographical presence • Independence from customers and suppliers
Robust financial performance
• Consistent revenue and earnings growth • High cash generation • Cash reinvested at high return on capital • Strong and growing dividend stream
Attractive business model -21-
Bunzl Business Case March 2013
Contacts
Bunzl plc +44 20 7725 5000 Michael Roney - Chief Executive Brian May - Finance Director
[email protected] www.bunzl.com
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Bunzl Business Case March 2013
Disclaimer No representation or warranty (express or implied) of any nature can be given, nor is any responsibility or liability of any kind accepted, by Bunzl plc with respect to the completeness or accuracy of the content of or omissions from this presentation. This presentation is for information purposes only and does not constitute and shall not be deemed to constitute an offer document or an offer in respect of securities or an invitation to purchase or subscribe for any securities in any jurisdiction. Persons in a jurisdiction other than the United Kingdom should ensure that they inform themselves about and observe any relevant securities laws in that jurisdiction in respect of this presentation. The presentation does not constitute an offer of securities for sale in the United States. None of the securities described in the presentation have been registered under the U.S. Securities Act of 1933. Such securities may not be offered or sold in the United States except pursuant to an exemption from such registration. This presentation contains forward-looking statements. They are subject to risks and uncertainties that might cause actual results and outcomes to differ materially from the expectations expressed in them. You are cautioned not to place undue reliance on such forward-looking statements which speak only as of the date hereof. Bunzl undertakes no obligation to revise or update any such forward-looking statements. Where this presentation is being communicated as a financial promotion it will only be made to and directed at: (i) those persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”); (ii) those persons falling within Article 49 of the Order; or (iii) to persons outside of the United Kingdom only where permitted by applicable law (all such persons together being referred to as “relevant persons”) and must not be acted on or relied on by persons who are not relevant persons.
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Bunzl Business Case March 2013